Personal Loan Terms: 4 Ways to Choose the Best Length

A personal loan can be helpful if you need a big sum of money quickly. These loans provide a solution to tackle significant expenses while paying lower interest rates than most credit cards. They can be utilized for almost any purpose, from financing a honeymoon to paying for an appendectomy.

A personal loan is paid in unchanging monthly payments; the duration of your loan determines how much money you pay to pay it back. The longer you take to pay off your debt, the more interest you’ll pay over the life of the loan.

Here are four ways to choose a personal loan term length that’s best for you and your needs:

1. Specify How Much You Can Afford to Repay Monthly

When choosing a loan term, evaluate how much you can afford to return each month. This is usually based on your income, debts, and upcoming expenses. Of course, if you only plan to pay back the loan in full, you won’t need to consider this element because you’ll pay no interest.

If you plan to have a long-term loan, consider your other bills, normal spending, and future demands like trips and Christmas. The longer the loan’s length, the higher the interest rate. For this reason, some people consider a shorter loan period if they have an average or low monthly income and can’t afford continual payments. This is why repaying a shorter-term, higher-rate loan over several years may be preferable.

2. Set How Much Time You Have to Repay the Loan

With personal loans, you can generally choose from a wide range of loan terms, with the average term being about 60 months. This means it will take about five years to repay the loan. However, you’ll pay far more to borrow for that five-year term than if you borrow for a much shorter period. That’s because the longer term means you’ll pay off the entire principal of the loan and will also have to pay interest over the same five-year period.

Before choosing the loan term that works for you, you should consider how much time you have to repay the loan. The shortest loan term with most lenders is four months.

3. Consider How Much Other Debt You Have

One of the essentials in choosing a loan term is how much other debt you have. Even if you’re able to pay the monthly payments, you may not be able to afford the total payments over time if you’re paying multiple loans.

If you have other loans ranging from a mortgage to a student loan, you may want to consider a longer loan term, as you will be able to save on interest in the long term.

4. Don’t Assume You Have to Stick With Your Lender’s Recommendation

A lender may recommend a loan term based on your credit history, income, and resources. Many lenders will assume you want to borrow over the long term if you have good credit and can afford the monthly payment. However, that’s not always the case.

Review the loan specifics, including the interest rate and the estimated total amount you will pay in interest during the loan’s duration, before deciding on the loan length.

If the numbers are high, you may want to consider a shorter loan term. If the figures are excessive, consider a shorter loan term. A longer-term loan may be the best option if you can afford the monthly payments and still repay the debt in full.


With personal loans, you can go from as little as four months to as much as 30 years. The most common are the 12-month loans, 5-year loans, 10-year loans, and 15-year loans. You should know that the longer the term, the higher the interest rate, so the more you will have to repay in interest over the loan term.

When deciding which loan term is best for you, consider your financial situation, the purpose of the money you are borrowing, and how much debt you have. However, remember that you don’t have to stick with your lender’s recommendations. If you can pay for a higher monthly payment, a lender who offers flexible repayment options may extend your loan term.

At Bessemer Finance Company, we offer a variety of personal loans in Bessemer, AL, to fit your needs. We will review our different options and put clients on an affordable payment plan upon approval. We do not make payday or title pawn loans, and there are no hidden fees. Bessemer Finance is a proud local company servicing local residents. If you are interested in talking with our team, call us today at 205-428-6361.


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